Family Matters

Nepotism is more the rule than exception

Rohan Murty, executive assistant to the Infosys chairman NR Narayana Murthy, recently presented several ways of promoting excellence in Indian universities, in an article published in a leading financial daily.

One of his suggestions was that “we must create a meritocratic environment for young researchers to flourish and do away with vestiges of gerontocracy or nepotism in our higher education institutions”.

It is good that he wants higher standards in academia than those followed in the corporate world; several eyebrows were raised when his father appointed Rohan to his present position.

If Rohan feels queasy about his appointment, he can take comfort from a recent article in The Wall Street Journal by Arthur Levitt, former chairman of the Securities and Exchange Commission in the US, who seems to justify influence peddling.

He feels hiring people you know helps because you know whom you are getting and “hiring is not a science”. He also feels hiring a well-connected person gets you a network of influential people. Particularly in the field of financial services where, he argues, that almost all business is transacted only through people you know.

At least he is honest. Perhaps thanks to all his connections over the years, he is now an advisor to Goldman Sachs, the American financial services firm.

Nepotism and merit

Levitt would have thrived in China, where guanxi — relationships and networks — is valued and is a key ingredient of success. JP Morgan, another US financial services firm, understood this very well and had a ‘sons and daughters’ programme — hiring the children of elites so they could generate business through them.

The company is now under investigation by US government agencies for this practice.

We expect to find family members occupying key management positions in family-owned businesses. In many cultures, the head of a family is expected to take care of the near and dear.

But in a public limited company, appointing close relatives is looked down upon as nepotism because merit is supposed to be the overriding criterion here.

Thriving practice

Clare Malone, writing in the news website, The Daily Beast, wondered about this thriving phenomenon in US society. She points out that when a senator’s son is able to start a hedge fund straight after finishing college, surely you have to wonder about the business acumen of the son and those giving him money to invest.

Most Indian political parties are full of the near and dear and resemble family businesses.

Leadership positions are inherited. But if the scion is anointed not just by the parent but also by tens of thousands of followers in an openly contested election, perhaps then there is some inherent merit.

It is the same in the field of entertainment where we see many children following in the steps of their parents and making use of established connections and networks to get a break in the business.

After they receive that first push, it is left to the people who buy tickets to the cinema to validate the merit of that individual.

How wonderful then to have both merit and connections!

This article was originally published in The Hindu – Business Line.

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